US manufacturing growth better than expected

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The index of factory activity in the US grew faster than expected in August. The Institute for Supply Management recorded a rise of 56.3 from 55.5 in July, beating experts' prediction that the number would fall.

If the factory activity index stays above 50, that indicates expansion in the sector.

The better-than-expected data signals that manufacturing is showing strength. It's a industry which has been leading the economic recovery in the US, expanding every month since August 2009.

The consecutive expansion has calmed fears that the US economy may fall back into recession. But, countering those good numbers, is the unemployment level. It's rise has kept concerns about slow economic growth alive.

Maury Harris, Chief Economist of UBS said "The unemployment rate probably edges up from 9.5 to 9.6 and it is going to stay relatively high because as soon as the job situation gets better you'll have people piling back into the labor force looking again. But I think what's important for the market though isn't so much the unemployment rate, per se, as what happens to the number of jobs."

The US government is expected to report on Friday that total payrolls dropped by 100,000 in August, the third straight month of job declines.

Last month, second quarter gross domestic product data showed the economic recovery was slowing. As the boost from the government stimulus package, worth some 800 billion dollars, fades, so does inventory rebuilding.

Christina Romer, the departing chairperson of the White House's Council of Economic Advisors, called for further steps to stimulate the U.S. economy. She says high budget deficits should not be an excuse for allowing the unemployed to suffer.

Christian Romer, Outgoing Chairperson of White House Council of Economic Advisors said "But concern about the deficit can not be an excuse for leaving unemployed workers to suffer. We have tools that will bring unemployment down without worsening our long run fiscal outlook - if we can only find the will and the wisdom to use them."

Another report on Wednesday showed construction spending dropped 1 percent to its lowest level since July 2000. June's construction outlays were

revised down to show a 0.8 percent fall, instead of the previously expected 0.1 percent gain.

Yet more data released Wednesday says US mortgage applications for home purchasing and refinancing increased last week, as interest rates hit a new low. That's a glimmer of hope for a housing market that has weakened once again.

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